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Retirement Income Security and Well-Being in Canada

Author

Listed:
  • Michael Baker
  • Jonathan Gruber
  • Kevin S. Milligan

Abstract

A large international literature has documented the labor market distortions associated with social security benefits for near-retirees. In this paper, we investigate the 'other side' of social security programs, seeking to document improvements in wellbeing arising from the provision of public pensions. To the extent households adjust their savings and employment behavior to account for enhanced retirement benefits, the positive impact of the benefits may be crowded out. We proceed by using the large variation across birth cohorts in income security entitlements in Canada that arise from reforms to the programs over the past 35 years. This variation allows us to explore the effects of benefits on elderly well-being while controlling for other factors that affect well-being over time and by age. We examine measures of income, consumption, poverty, and happiness. For income, we find large increases in income corresponding to retirement benefit increases, suggesting little crowd out. Consumption also shows increases, although smaller in magnitude than for income. We find larger retirement benefits diminish income poverty rates, but have no discernable impact on consumption poverty measures. This could indicate smoothing of consumption through savings or other mechanisms. Finally, our limited happiness measures show no definitive effect.

Suggested Citation

  • Michael Baker & Jonathan Gruber & Kevin S. Milligan, 2009. "Retirement Income Security and Well-Being in Canada," NBER Working Papers 14667, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:14667
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    File URL: http://www.nber.org/papers/w14667.pdf
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    References listed on IDEAS

    as
    1. Michael Baker, 2002. "The Retirement Behavior of Married Couples: Evidence from the Spouse's Allowance," Journal of Human Resources, University of Wisconsin Press, vol. 37(1), pages 1-34.
    2. Michael Baker & Jonathan Gruber & Kevin Milligan, 2007. "Simulating the Response to Reform of Canada," NBER Chapters,in: Social Security Programs and Retirement around the World: Fiscal Implications of Reform, pages 83-118 National Bureau of Economic Research, Inc.
    3. Michael Baker & Jonathan Gruber & Kevin Milligan, 2004. "Income Security Programs and Retirement in Canada," NBER Chapters,in: Social Security Programs and Retirement around the World: Micro-Estimation, pages 99-152 National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. Serena Yu, 2016. "Retiree Welfare and the 2009 Pension Increase: Impacts from an Australian Experiment," The Economic Record, The Economic Society of Australia, vol. 92(296), pages 67-80, March.
    2. Garry F. Barrett & Milica Kecmanovic, 2012. "Changes in Subjective Well-being with Retirement: Assessing Savings Adequacy in Australia," Social and Economic Dimensions of an Aging Population Research Papers 296, McMaster University.
    3. Milligan, Kevin, 2013. "Employer-provided pensions, incomes, and hardship in early transitions to retirement," CLSSRN working papers clsrn_admin-2013-24, Vancouver School of Economics, revised 29 Apr 2013.
    4. Nicole Uhde, 2010. "Soziale Sicherheit und Lebenszufriedenheit: Empirische Ergebnisse," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 11(4), pages 407-439, November.
    5. Sule Alan & Kadir Atalay & Thomas F. Crossley, 2008. "The Adequacy of Retirement Savings: Subjective Survey Reports by Retired Canadians," Canadian Public Policy, University of Toronto Press, vol. 34(s1), pages 95-118, November.
    6. Milligan, Kevin, 2014. "How is economic hardship avoided by those retiring before the Social Security entitlement age?," Journal of Pension Economics and Finance, Cambridge University Press, vol. 13(04), pages 420-438, October.
    7. Kevin Milligan, 2008. "The Evolution of Elderly Poverty in Canada," Canadian Public Policy, University of Toronto Press, vol. 34(s1), pages 79-94, November.

    More about this item

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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